Is Your Company Ready to Become a Payment Facilitator?

One of the most frequent questions I am asked by investors, ISVs, ISOs and anyone looking at payment facilitation is Am I big enough to become a payment facilitator? or How much revenue or volume do I need to be a payment facilitator? While these questions are great starting points, the truth is there is no magic number for how much revenue or volume a company needs to have.

This is only one of several key factors. What are the others that must be considered?

1. Risk Tolerance

Your company’s risk tolerance may be an even greater consideration than revenue or volume. Do you want to take on the responsibility for 100% of your clients’ payment risks and liabilities? This is foundational to payment facilitation. Risks can be as routine as chargebacks up to clients going out of business, and can also extend to fraud activity, theft, and even hacking.

Management of risk is the responsibility of the payment facilitator. Sure, there are many ways risks can be managed and mitigated. Risk will never be entirely eliminated however, and a prospective payment facilitator will need a good understanding of the risk/reward ratio that applies to their business.

2. Resources

It’s important to calculate the level of resources your company would be able to apply to managing a payments operation. As a payment facilitator, you’re obligated to take on a number of complex obligations: underwriting, risk management, compliance, and servicing, to name a few. Various aspects require you to build a payments operation inside or adjacent to your core business. That means you’ll need to have trained and experienced people both at the executive level and the staff level.

The question is whether your company is ready, willing and able to dedicate this level of resources toward a payments operation, and if it can be done without defocusing the company and distracting from the core business. Sometimes even huge companies aren’t ready for the rapid change and realignment of resources needed.

3. Growth Trajectory

Another frequently asked question is if the company’s value will increase if they become a payment facilitator. Perhaps, but the company’s growth trajectory before and after payment facilitation is a critical factor. Do you plan to double the size of your business in the next three to four years, or is the growth less certain? Will you be able to increase your market share? Does payment facilitation have a direct bearing on these answers?

As we saw earlier, a company will establish payments operations, and ideally this becomes a profitable endeavor by improving your competitive position. If you are already growing, and payment facilitation will drive more growth, you may be a good candidate to become a payment facilitator.

4. Your Company’s “Why”

It pays to dig deep as to why you want to be a payment facilitator. Do you see payment facilitation as a means to help you grow revenue or share? Does it help solve a marketing problem, a support issue, or give you greater control over client relationships? Does it allow you to bring a new solution to market? Is it purely a competitive need? Depending on the competitive landscape in your particular business segment, the answers to these questions may be very different. Other models may be more suitable for achieving your objectives at a better cost/benefit ratio.

Each of these factors—risk tolerance, resources, growth trajectory, your company’s “why”, and of course size—should be considered together before determining if becoming a payment facilitator is the best approach. Once you’ve examined all the drivers and expected outcomes, you will see the size of your company is certainly critical. But it’s not the only factor, and perhaps not even the most important. An experienced payment facilitation consultant can walk your company through these considerations to find the payments program that’s best suited to your business strategies. Payment facilitation has proven to be a winning model for many companies, and it may be right for you. But it isn’t the only payment acceptance model. RPY will help you find and implement the program that will best help you achieve your strategic objectives.